From Overseas Press

China slows to cruising speed, Europe perks up

(Agencies)
Updated: 2010-08-05 11:29

Manufacturing in China shrank in July for the first time since March 2009 while it perked up in the euro zone, according to surveys that underscored the unevenness of the global economic recovery.

Global stock markets rose on Monday, viewing a declining Chinese manufacturing purchasing index as a signal of a desired slowdown rather than a harbinger of a slump.

Investors also looked ahead to the equivalent US data due later on Monday for further signs that the recovery in the world's biggest economy might be stalling, three days after second quarter output numbers there came in below forecasts.

Manufacturing surveys from two other big emerging economies served to bolster investor sentiment, with India marking its 16th month of expansion and Russia's activity improving for the seventh month in a row.

The euro zone's manufacturing purchasing managers index rose higher above the 50 mark that separates growth from contraction to 56.7 in July from 55.6 in June, led by Germany and Italy.

But manufacturing growth slowed to its weakest in 10 months in France, illustrating how uneven the rebound is even within Europe.

HSBC's PMI of Chinese companies showed government steps to slow bank lending and fight property speculation hit home, as the headline index dipped below the 50 mark for the first time since the depths of the global downturn.

"This is the slowdown that the government `wanted'-this is no new global crisis," said Roland Randall, strategist at TD Securities. "Targeted government restrictions and receding fiscal stimulus are to blame."

A similar government survey published on Sunday showed a marked dip in growth but no contraction.

European manufacturing was supported by a hefty jump in activity in No.1 economy Germany and British factories that saw expansion easing only slightly in July, although both countries saw slowing export order growth.

"It is apparent that the improvement signaled by the euro area PMI for July was almost entirely driven by a growth spurt in Germany," said Chris Williamson, chief economist at Markit.

On Monday, German retailer Metro-the world's 4th largest-said it was more confident about the economic recovery as it reported overall profits in line with forecasts.

But more worryingly, the PMI showed manufacturing growth in France slowed to a 10-month low, with little sign of a 27-month stretch of job losses abating.